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Having determined to make 7.5% GDP growth an unmovable target, China’s continued slow growth has now compelled its politicians to begin to draw down their silver bullet, the massive deposit reserves residing on the central bank’s balance sheet. It is unclear whether this will produce real growth or simply enable statisticians (and politicians) to claim the achievement of the now politically sacred number. What is clear is that it marks the first disbursement from the bank deposit reserves, totaling some 21 trillion renminbi ($3.5 trillion) and held by China’s central bank, the People’s (PBOC). That is not the large number it appears to be: In 2013 alone, total social financing showed incremental credit for the year of about 17 trillion renminbi. So the silver bullet, at best, can only buy time and perhaps stir up inflation, it is hardly the final solution to China’s economic growth challenges.

The deposit reserve ratio over the past several years became the PBOC’s favored policy tool to manage the economy’s burgeoning liquidity and so hold down inflation. Over the decade leading up to the 2008 financial crisis, the reserve ratio grew to an unbelievable level of 20%, as liquidity created by export and direct investment proceeds flooded the economy. Now, several years later, if they are to continue to lend in support investment and, therefore, GDP growth, overburdened bank balance sheets require either a new round of capital raising or the release of some of these reserves or both.

In effect, the reserves represent the last readily available source of capital that can be used to fund investment activity and drive job creation and GDP growth. They are Premier Li Keqiang’s silver bullet.

The first release of these reserves is reportedly massive (the central bank has yet to confirm the loan), some one trillion renminbi ($182 billion) representing an effective reduction in the reserve ratio from 20% to 19%. But instead of a pro rata reduction in the ratio across the banking system, the PBOC has designed a “targeted” loan from the reserves to the China Development Bank alone. This loan is equal to a whopping 12% of China Development Bank’s (CDB) total 2013 assets. Its stated purpose, according to some analysts, is designed to lower funding costs for the usual infrastructure projects as well as low-income housing.

Why the reliance on one bank to disburse the loans instead of all banks, as was done in 2008 for the original four trillion yuan economic stimulus package? The idea that the purpose is to lessen project interest costs is unpersuasive, as a near sovereign CDB already enjoys highly preferential borrowing rates in China’s bond markets with massive issuance quotas approved by the PBOC that, at times, have rivaled even amounts issued by the Ministry of Finance. For example, the bank issues short term bonds at the one-year deposit rate plus 50 basis points. Moreover, the PBOC has always provided loans directly to CDB to finance its activities, other than its size, this new facility is anything but new. Finally, as a policy bank, CDB’s mission since its founding in 1994 has been to finance policy projects that are not meant to be profitable, and it is in a position to charge the most preferential of interest rates.

So why back in 2008 did they rely on the banking system as a whole instead of the policy banks? Events at the time suggest that China’s then leadership may have panicked at the sudden collapse in global demand that almost immediately shut down China’s export machine and the jobs it created. The use of the banking system quickly injected massive amounts of liquidity into the economy and did bolster growth, but at the cost of “fiscalizing” China’s nominally commercial banks. The consequences of this may ultimately be worse than the problem: With the urging of provincial governments, China’s banks went on a lending binge that has created a major financial challenge for the new leadership today.

There is little doubt that the bulk of these “crisis” loans should be seen as policy loans that would normally be funded by national or provincial budgets. Instead, the loans have been financed by China’s retail and corporate depositors and so must be repaid (sometime). In the meantime, these quasi-fiscal loans clog bank balance sheets and also limit the government’s own financial flexibility. Reliance on the issuance of new debt is also constrained, since banks are the primary purchasers of government, policy bank and corporate. With both central and local government budgets in deficit, China faces a growing fiscal challenge to increase on-budget tax revenues. Consequently, the pressure on the central bank to release the deposit reserves must be tremendous.

So for the central bank to rely on China Development Bank to disburse the reserves makes sense. It allows the bank to appear supportive of the Premier’s desire for 7.5% growth, as well as innovative in its support. At the same time, the arrangement gives the central bank far greater control over the process, since it virtually controls the bulk of CDB’s funding, either through its bond quotas, direct lending or control over the new loan facility. In the event that inflation picks up, the central bank can easily tamp down this source of liquidity. In the meantime, it can disburse deposit reserves in an orderly manner that does not conflict with its control of monetary policy. But once released, the People’s Bank will have an increasingly hard time controlling the outflow of the deposit reserves. Assuming the global economic environment remains as it is today, what will China’s leadership do once the bulk of these reserves are put to use?